Founded in 1981, TOUNETSU is a major manufacturer of industrial furnaces, based not only in Japan, but also in China, India and Thailand. TOUNETSU specializes in aluminum casting furnaces, catering particularly to the automotive industry. As electric vehicles (EVs) take on a growing market share amid a push towards cleaner and more sustainable energy sources, the company is adapting to the changing needs of its clients. We sit down for an interview with president Kiyata Mochizuki, who explains that TOUNETSU’s commitment to reducing carbon emissions goes hand in hand with that of its clients.
In recent years, we have seen regional manufacturers in countries such as China, South Korea, and Taiwan emulating Japanese products and processes but at a cheaper cost. However, Japanese firms, both large and smaller chuken kigyos, have maintained handsome market shares in niche B2B segments characterised by high-mix, low-volume production. How have Japanese companies remained competitive despite stiff price competition?
By nature, Japanese people like to pursue the finer details in things, and this fact has allowed Japanese companies to excel in niche fields. Also, there are many companies like ours who make custom-made products. We listen carefully to our customers’ requests, which are often very specific, and when we do so, we think about the reason behind their demands. Japanese companies are always listening and catering to very specific, minute requests. This fineness has allowed them to be competitive in the world market. I have visited many overseas companies and factories and have realised that they differ from Japanese factories, where processes are carried out very meticulously, in pursuit of the finer details and responding to customers’ specific requests. Japanese employees are trained in an environment where people pay a lot of attention to fine, minute details, and this is one of the strengths of Japanese companies.
Another big difference, I feel, is the relationship with customers. We have a saying: “The customer is God”. In business-to-business relations, the “customer is god” attitude takes many forms. The company is the customer that enjoys the same high level of service, but in a business-to-business context rather than just the high level of politeness and being on top of details that an individual customer would experience there is another dimension that is expected. In the context of Japanese companies, it is beneficial to hold customers in a higher regard than yourself because it is then easier for them to communicate their requests – and in responding to these requests we can improve ourselves. Therefore, in the research and development (R&D) phase, we try to work on customers’ specific needs. If this process is successful, that is great, but if it is not, we review the entire process and try to identify the reasons we were not successful.
In niche fields where there is that strong custom-built relationship with clients, a high level of responsibility falls on engineers. Specialised manufacturers have strong human resources, but these are threatened by Japan’s ageing and shrinking population. How do you plan on mitigating the impact of Japan’s declining population on your company?
To mitigate the impact of the demographic issue, we are working as a borderless company. We have our subsidiaries in China, India and Thailand, and we have engineers who have been trained and can work together. Japan has a population of around 125 million people, and soon, not only will the overall population decline, but the working age population will have decreased even further as a proportion of the older generation. For us to continue operating, it is important to expand our market globally. We are focusing on areas with larger populations such as China, the US, and Europe. We began approaching global markets around 10 to 20 years ago, visiting many countries to learn about their requests and approaches, and how they use the technology. Our vision is for our company here in Japan to become the R&D centre, where the brainwork is conducted, but for production to be moved overseas. We want our products to be locally procured and locally made using Tounetsu technology. It is important that we focus on improving ourselves by working with global companies as well as Japanese companies with specific requests.
You talk about responding to clients’ needs: your aluminium casting furnaces are mainly catered to automotive manufacturers, and the automotive field is experiencing huge transformations, namely the shift towards electrification and the adoption of lighter materials, such as aluminium and resins such as CFRP, to replace heavy, ferrous metals such as iron and steel. How are these changes impacting your business and are you launching any new products?
As you mentioned, the automotive industry is now shifting to electric vehicles (EVs). In combustion engines, aluminium components are thicker; they need to withstand strong vibrations in the engine, which also uses coolant. With the switch to EVs, the motor, now a rotating coil, produces less vibrations, which gives the car a longer lifespan, and the aluminium in the components needs to be thinner for lightening the weight which requires high metal temperature and high metal quality. We are trying to determine how we can cater to the exact characteristics needed for EV components and develop the appropriate firmness to meet the requests of the automotive companies and aluminium part producers we work with.
At the same time, it is important to focus on what customers are using as energy sources for our furnaces, whether they are using biomass, or green hydrogen – the former generated by renewable energy, and the latter using gas. For example, if gas is used, we must ensure that all of it is high-efficient burn during production. Alongside our products that are already selling well, we are currently developing products that cater to future needs.
Our new product is called YUKAI, and we started marketing it about three years ago. Three clients, including in the automotive sector, are using it already. The characteristic of this furnace is that it is used to melt aluminium used in EVs, which is thinner and of higher quality. Molten aluminium is made from aluminium ingots by using the direct flame burner or heater; however, aluminium gets oxidised easily, and if you burn it, H2O and carbon dioxide are emitted in the atmosphere. To eliminate this, we are melting aluminium in liquid by non-direct flame form with a non-oxidative environment. Therefore, the furnace itself is more environmentally friendly, and represents a very new approach. YUKAI will meet next-generation requirements in the automotive sector and will increase heat efficiency.
The shift in the automotive sector and adoption of alternative energy sources are symptomatic of the transition to a carbon neutral society – for example, Japan aims to reach carbon neutrality by 2050. You are pursuing the development of more energy efficient furnaces to respond to this trend. In what way does this represent an opportunity for your business?
Fundamentally, making products in an environmentally friendly way requires using less energy. There is a push to diversify into a variety of energy sources. Electricity can be generated from renewable sources such as wind and solar, and I mentioned green hydrogen, and biomass; for example, in countries with bigger populations and a lot of agriculture, ethanol will be widely used. In Europe too there is a certification system for sustainable biofuels. We must meet the requirements of whatever energy source is used in each of the countries where we operate.
Secondly, heat dissipation from furnaces must be reduced. Using less heat and less energy means emitting less carbon dioxide, so it is important to reduce the amount of energy used for each manufacturing process. For our furnaces to be energy efficient, heat dissipation must be mitigated as much as possible. On average, our furnaces are 1 metre high, 3 metres deep and 2 metres wide, and a furnace of this size generally uses 30 kilowatts of power. However, if we could reduce that to 27 kilowatts, then we would be able to cut CO2 emissions by 10 percent, which would be huge when considering it per installation area of device. That is what we are focused on. At the same time, the temperature difference between the surrounding environment and machinery plays an important role. For example, if the surface temperature of the furnace is 60 degrees Celsius, and the temperature of the surrounding environment is 20 degrees, then you lose 400 kcal/㎥ because of heat dissipation. If you could reduce the difference in temperature, then you would be able to limit heat dissipation. Whenever we conduct R&D or assess our equipment, we also measure the temperature of the furnace and surrounding environment to determine the level of energy efficiency.
The government and industry are discussing what sources of energy should be used to attain carbon neutrality. Another key factor is making machinery and equipment more energy efficient. If you could use hand power to generate products, that would be ideal, but of course you cannot do that. To make a product, you need to treat it with heat, and how efficiently you use that heat is crucial. It is up to companies such as ours to make machinery that is more efficient, more compact and requires a smaller surface area to make each product more environmentally friendly.
You specialise in casting aluminium furnaces and have also moved into vacuum furnaces. These are unique because materials are heated in a vacuum, therefore removing gases and preventing contamination and oxidation, which allows for materials to be heated at higher temperatures and for more accurate heat treatment control. To that end, vacuum furnaces can be used for very technical applications, including electronics, aerospace, and medical instruments. What are some of the competitive advantages of your furnaces?
Our vacuum furnace is mainly used for sintering; metal powder is mixed with a binder, and the furnace is used to make sintered metal, which can be applied to various fields, including aerospace. The characteristic of our vacuum furnace is that it can heat materials at more than 2,000 degrees Celsius and the pressure can reach 1 megapascal. Materials can be heated up very quickly without oxidation, therefore resulting in high-quality sintered metal. Currently, in our Kansai plant, we are making a vertical-type vacuum furnace that can reach more than 2,000-degrees Celsius. Its main advantages are rapid heating and cooling in a clean environment.
We make sintered material from fine ceramics and provide it to other companies, which manufacture the components that we use in our furnaces. They need the furnaces for sintering fine ceramics, so we provide the furnace and then buy the products from them. It is a win-win situation.
We know that your company is present in China, India, Thailand, and the US. Looking ahead, what is your strategy for international expansion?
We have patents, including for innovations such as our under-heater technology, in Japan and all over the world, in countries such as the US, China, Thailand, and Vietnam. Our global department works with the engineering and manufacturing departments, and we have regular meetings with our subsidiaries in India, China, and Thailand, so we can always be on the same page when it comes to the latest technologies and designs.
We also have a partnership with Pyrotek Inc. in the US and Czech Republic, so we provide them with technical guidance, make factory visits, and share our technology. Our strategy is to licence our patents. It takes about two or three years to get a patent, which lasts 20 years, so it can effectively be used for around 17 or 18 years. Within this timeframe, we want to let our partnering companies use the patents in their localities, therefore making profits by using Tounetsu technologies. We are looking to ensure that our patents expand to many countries, and let companies use our licences, and we have many more patents that are in the process of being evaluated. It is also important that, while disclosing our patents to partnering companies, we develop new technologies to sustain our development in the long run.
Imagine we come back to interview you again on the last day of your presidency. What dreams or goals would you like to have achieved by then?
First, let me share our midterm strategy with you. In five years’ time, we plan to establish a new factory in Fujinomiya city, for which we have already purchased a plot of land, and will be starting construction soon. Second, we want to develop and marketing eco-friendly products using our thermal technology. Third, we are interested in establishing a new venture company focused on researching new thermal technologies.
We also have our agricultural business to provide jobs for retired workers over the age of 65. Our chairperson, who established the company in 1981, is working in the agricultural department, which is very high tech; they use autonomous driving trucks and GPS, for example. I have also contributed by preparing seedlings to plant rice. Like our main line of business, growing food is all about heat and energy.
My personal goal is not to increase the company’s size, but rather to build a technology-oriented company. At work we have fun and joke around, but we are also serious about our key technologies and becoming a point of reference in heat technology research both in Japan and globally.